Firm A competes in a market in which the demand for its product and its selling price are highly un-predictable. Firm B competes in a market in which these factors are much more stable. Which firm probably creates and monitors cash budgets more frequently?
Answer to relevant QuestionsDescribe and evaluate the use of return on investment (ROI) and economic value added (EVA) as growth targets in financial planning. Why do firms often use annual growth in sales or assets as a target growth rate? What can be done to deal with uncertainty in the cash budgeting process? Why might an intra-month view of the firm’s cash flows cause a well-prepared cash budget to fail? Why do we include only the variable cost of sales when estimating the average investment in accounts receivable? Why do we apply an opportunity cost to this investment to estimate its cost? What is the ABC system? What role does the EOQ model play in controlling inventory? How does it capture the opportunity costs associated with inventory investment? What is the difference between a ZBA and a controlled disbursement account? Are they direct substitutes?
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